International Markets Bureau

MARKET INDICATOR REPORT | JULY 2011

Consumer Trends Pet Food in Canada

Source: Shutterstock

Source: Shutterstock

Title Consumer Trends Subtitle in Canada Pet Food

EXECUTIVE SUMMARY
Differentiation and premiumization are driving growth in Canadas pet food market. The development of enhanced pet food products is creating greater segmentation with factors such as age, breed and health maintenance, as the focus in this market. Pet humanization has evolved to the point where consumer preference for natural pet health products and nutritional ingredients is growing. Pet owners are looking for natural ingredients to ensure their pets stay healthy. They want to see ingredients that are recognizable, and that are similar to what they themselves are eating. The pet food industry has responded to pet owners through product expansions and selections, incorporating demands for natural, organic, eco-friendly, health and wellness, and new tastes and flavours. It is estimated that 35% of Canadian households owned a cat in 2010, with an average of 1.8 cats per dwelling. Canadian cat food sales are expected to grow at a Cumulative Average Growth Rate (CAGR) of 3%, reaching CAD $738 million in 2015. The dog population in Canada was just over five million in 2010, with 32.3% of Canadian homes owning a dog, down slightly from 35.1% in 2009. Over the next few years, dog food sales are projected to grow in constant value at a CAGR of 3%, to total CAD $1.1 billion in 2015. Ongoing global economic uncertainty is having an impact on not only what pet owners purchase, but also where they shop. While pet specialist retailersespecially pet superstorescontinue to help drive pet humanization, grocery retailers are receiving a boost in pet food sales as consumers become more price conscious. Pet-related spending will continue to increase rapidly over the coming years, due in large part to the aging pet population, and owners seeking higher quality food for their pets. Furthermore, according to BMO Capital Markets economic outlook (May 2010), real disposable income in Canada was expected to increase by 3% in 2010, and 2% in 2011. Discretionary spending is highly correlated to levels of disposable income and in the context of pet care, higher disposable income will lead to increases in pet-related spending. New regulations on pet food imports from the United States (U.S.), which Canada introduced in 2009, have raised barriers to entry, and thus created new opportunities for the domestic pet food manufacturing industry.

INSIDE THIS ISSUE

Executive Summary Consumer Trends Retail Trends Market Data Industry Competition Regulations and Labelling Product Developments Dog Food Cat Food Other Pet Food Annex A Annex B 2 3 3-4 5 6-7 8 9-10 11-14 15-18 19-22 23 23

Source: Shutterstock

DID YOU KNOW?

Pet

humanization is driving pet food purchases.

Canadian

pet owners prefer to purchase pet food from grocery retailers.

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CONSUMER TRENDS

Friskies brand cat food is the most popular purchase among cat food buyers. The company offers a multi-flavour, gourmet variety-pack, enabling consumers to try flavours they might not have thought of purchasing. Del Monte has followed suit offering similar pack options for their Meow Mix brand, however, some other cat food manufacturers are instead attempting to attract customers through marketing and image upgrades for their products and brands. There has been a shift in sales from wet to dry cat food in recent years, and this movement is expected to continue. Canadian consumers preference for dry cat food can be attributed to convenience in terms of storage, and the option to buy in bulk. They also feel that dry cat food is more sanitary because cats do not generally eat all of their food in one sitting. Dry food was the most popular choice amongst Canadian dog owners, with Mars Canada Inc.s Pedigree brand garnering a 19% market share in 2009. In addition, the companys Pedigree brand of dog treats took top spot in terms of market share in 2009, at 20.2%. Subtle pet ownership changes are occurring in Canada. Numbers indicate that there was a decline in ownership of ornamental fish and a rise in the incidence of small reptiles being kept as pets, especially certain varieties of lizards such as geckos. These changes are a result of demographic and lifestyle changes. Reptiles require less maintenance and are well-suited to being kept in captivity, making them an ideal pet for urban settings.

RETAIL TRENDS
Grocery retailers remain the largest distribution channel for commercial cat food. Cat food is less specialized, cheaper and offered in less bulky packaging which makes it easier to pick up while grocery shopping. To further boost cat food sales, grocers frequently offer in-store cat food promotions that are not normally available through specialty outlets. Canadian dog owners also preferred making pet food purchases through their grocery retail channel. As with cats, dog owners also resorted to bulk buying and taking advantage of the cheaper retail channel, giving grocery discounters 21% of dog food retail sales in 2009.

Source: Mintel

Pet superstores and supermarkets/hypermarkets also saw increases in the value share of dog food sales, as they were able to offer in-store promotions and discounts, in addition to bulk purchasing and private label selections, including premium variations. The majority of products relating to other pets are only available through pet-specialist retailers, and are typically not widely advertised beyond store flyers and in-store promotion. Due to low levels of competition in the other pet food sold through pet-specialists and retailers, there is high mark-up of product. These higher prices exist to balance out the low volumes of other pet food sold in Canada. Compared to the range of dog and cat food found in grocery retailers, the selection of other pet food is far more limited. Grocers are reluctant to stock wide selections of other pet food due to its limited demand and low volume sales. Nestle SAs strategy of selling pet food through pet stores has made the company less susceptible to the price sensitivity usually associated with supermarkets, with the company reporting higher pricing each year for the past decade.

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 Leaders in Canadas hypermarket and superstores are: Walmart, Loblaws (No Frills and Maxi), Metro (Super C and Food Basics), and Sobeys (Price Chopper). Top supermarket and neighbourhood store leaders are: Sobeys, Loblaws, Jim Pattison Group, and Metro. Discount store leaders are: Dollarama, Hudsons Bay Trading Company, Jim Pattison Group and Dollar Tree. Wholesale clubs leaders are Costco, followed by Loblaws. The leading pet superstores in Canada are PetValu and PETsMART. PetValu Inc., a pet-specialty retailer, has concentrated its stores in Ontario and Manitoba.

Canada - Dog and Cat Food Sales by Distribution Format: % Analysis 2010 Cat Food Dog Food Grocery Retailers Supermarkets/Hypermarkets Discounters Other Grocery Retailers Non-Grocery Retailers Pet superstores Pet shops Veterinary clinics Other Non-Grocery Retailers Total
Source: Euromonitor

72.8 40.3 21.1 11.5 27.2 15.2 6.5 3.1 2.3 100

67.9 34.7 20.8 12.3 32.1 16.1 7.5 2.7 5.8 100

Canada - Penetration of Private Label in Pet Food by % 2005-2009 2005 Pet Food 8.2 2006 8.2 2007 7.7 2008 7.6 2009 7.7
Source: Planet Retail

Source: Euromonitor International

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INDUSTRY COMPETITION
Pet food total imports into Canada reached CAD $708 million in value for 2010, a drop from CAD $749.9 million in 2008. However, imported pet food volume in 2010 increased by three million kilograms over 2009 figures. Unit pricing reflects the drop in sales, with a per kilogram value of CAD $1.75, a drop from CAD $1.87 in 2009. The majority of pet food imported into Canada comes from the United States, which supplies approximately 75% of Canadas pet food imports. The small size of the other pet food market, combined with distribution primarily through specialized retail, represents a certain barrier to entry and market development in the other pet food industry. None of the leading global pet food companies, which maintain a strong presence in dog and cat food, are present in other pet food. This trend shelters the players already involved in the category from further competition. This, combined with low levels of advertising, has led to a relatively stable status quo in terms of competitive positioning. Five manufacturers and private label players account for the majority of other pet food value sales in Canada.

Canada - Pet Food Import Statistics - CAD $ 2005 2006 2007 World 538,236,339 580,383,455 620,033,387 United States 501,792,068 543,346,282 573,873,051 China 9,328,357 12,204,407 13,984,575 Thailand 407,456 297,376 3,494,560 France 7,551,311 6,534,203 6,269,187 Bulgaria 3,794,560 3,066,932 2,706,944 Malaysia 69,123 38,096 938,777 Germany 3,321,231 3,459,073 4,133,443 Indonesia 3,808 1,264 154,819 Belgium 921,129 819,755 1,352,949 Canada* 624,311 495,170 634,248

2008 2009 720,937,642 749,845,998 667,655,698 692,163,838 18,578,011 19,072,706 3,889,661 5,832,334 6,112,696 8,155,110 3,091,021 3,322,128 2,581,887 3,716,557 4,144,272 3,245,073 1,152,828 1,462,251 1,743,224 1,491,113 1,148,775 1,166,305

2010 708,139,016 639,813,238 25,347,690 7,622,833 6,999,535 6,607,598 3,828,604 2,108,192 2,106,042 1,851,424 1,475,065

*Constitutes re-imports, or goods that have been exported abroad without having been materially altered, or substantially enhanced, before re-entering Canada. Source: Global Trade Atlas

Canadian Global Import Statistics - Pet Food - Kilograms 2005 395,807,456 2006 402,201,774 2007 2008 2009 2010

467,517,562 430,916,755 401,218,581 404,812,580

Source: Euromonitor International

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MARKET DATA
The overall cat population in Canada reached 8.4 million in 2010, remaining relatively stable since 2008. It is estimated that 35% of Canadian households owned a cat in 2010, with an average of 1.8 cats per dwelling. The average age of a family cat is 5.7 years. Seventy percent of the Canadian cat population is over the age of four, and one-fifth of that group are over the age of 10. The high number of cats in Canada can be attributed to the fact that cats are more adaptable to city life and apartment living, and the cost of ownership for cats is much lower than it is for dogs. Cats are also easier and cheaper to obtain, often being given away, compared to the more rigid screening and suitability assessments many dog owners are subjected to prior to ownership. Dry cat food will experience an increase of CAGR 4% in value, and will be mainly attributed to sales of premium dry cat food, which is forecast to see a CAGR of 6% in value and 5% in volume. Wet cat food sales will remain stable with a projected CAGR of 2% in value, coming from premium selections. The dog population in Canada was just over five million in 2010. The number of Canadian homes with a dog fell slightly to 32.3% in 2010, from 35.1% in 2009. A closer analysis shows multiple dogs are residing in fewer Canadian homes. The average age of the Canadian dog population is 5.9 years and rising, 63% are over the age of four, 33% are over eight and only 8% are aged under one year old. This age structure has implications for the industry, creating demand for food that can address the health concerns of senior dogs. In 2009, 33% of dry dog food and 30% of wet dog food consumed in Canada were targeted towards senior pets, a significant jump from the 18% recorded in both categories in 2008. Over the next few years, dog food sales are projected to grow in constant value at a CAGR of 3%, reaching CAD $1.1 billion in sales for 2015. While the dog food industry is mature, particularly mid-priced dog food, new sales are coming from premium dog food and dog treats. Pet nutrition is a high priority for many dog owners, and is fuelling the growth in the premiumization trend. As owners pay increased attention to what their dog is eating, manufacturers are increasingly offering products high in protein and low in by-product fillers and artificial additives. The other pet food sector is small relative to the dog and cat food sectors, and has fewer, generally specialized manufacturers, who tend to produce only other pet food products. In Canada, there were approximately 2.7 million birds, 8.3 million fish, 1.2 million small mammals, and 266,000 reptiles in 2010. The other pet food sector garnered a 1.7% increase in sales in 2009 over 2008 figures, and is projected to continue this trend in the near future. The value CAGR from 2005-2010 is 1.1%, while the volume CAGR from 2005 to 2010 was 9.5%. Interesting to note is the growing popularity of reptiles over fish, however, Canadians love of more conventional pets will limit the other pet sectors overall growth in popularity. This rising pet population continues to contribute to an increase in the overall market for pet food, both in value and volume terms, although some categories such as bird and fish food, have been underperforming compared to products such as cat or dog food.

Canada - Pet Food Market - US Millions 2005 Cat Food Dog Food Other Pet Food Pet Food Total
Source: Euromonitor PAGE 5

2006 542.6 799.80 58.5 1,400.9

2007 566.3 834.30 60.9 1,461.5

2008 591.7 868.40 63.2 1,523.3

2009 612.3 899.40 65.7 1,577.4

2010 632.5 933.00 68.2 1,633.7

522 769.40 55.6 1,347

Canada - Pet Food Brand Shares (by Global Brand Owner) - Retail Value RSP - % Breakdown Brand Company name (GBO) 2005 2006 2007 2008 Pedigree Mars Inc 11 11 11.2 11.2 Whiskas Mars Inc 7.5 7.6 8 8.2 Friskies Nestl SA 6.6 6.8 7.1 7.6 Iams Procter & Gamble Co, The 7.1 7.3 6.7 6.3 Dog Chow Nestl SA 4.7 4.7 4.7 4.8 Hill's Science Diet Colgate-Palmolive Co 3.6 3.7 3.6 3.7 Cat Chow Nestl SA 3.8 3.7 3.8 3.9 Purina ONE Nestl SA 2.9 3 3.2 3.5 Beneful Nestl SA 2 2 2.3 2.5 Alpo Nestl SA 2.5 2.3 2.4 2.4 Kibbles 'n' Bits Del Monte Foods Co 2.4 2.4 2.4 2.1 Nutro Mars Inc 1.7 1.6 Pro Plan Nestl SA 1.4 1.4 1.6 1.7 Milk-Bone Del Monte Foods Co 1.3 1.3 1.3 Pup-Peroni Del Monte Foods Co 1.1 1.1 1.1 1.2 Meaty Bone Del Monte Foods Co 1.4 1.4 1.3 1.3 Eukanuba Procter & Gamble Co, The 1.4 1.4 1.2 1.2 Fancy Feast Nestl SA 0.9 0.9 1 1 Snausages Del Monte Foods Co 0.8 0.9 0.9 1 Tetra Spectrum Brands Inc 0.8 0.9 0.9 0.9 Meow Mix Del Monte Foods Co 1 0.9 0.9 Jerky Treats Del Monte Foods Co 0.8 0.8 0.8 0.8 Living World Rolf C Hagen Inc 0.5 0.5 0.5 0.5 Nutrafin Rolf C Hagen Inc 0.5 0.5 0.5 0.5 Cesar Mars Inc 0.4 0.4 0.5 0.5 Hartz Hartz Mountain Corp 0.5 0.5 0.5 0.5 9 Lives Del Monte Foods Co 0.7 0.6 0.5 0.5 Pounce Del Monte Foods Co 0.6 0.5 0.5 0.4 KayTee Central Garden & Pet Co 0.4 0.4 0.4 0.4 Beggin' Strips Nestl SA 0.3 0.3 0.3 0.3 Techni-Cal Mars Inc 0.3 0.3 0.2 0.2 T Bonz Nestl SA 0.2 0.2 0.2 0.2 Sun Seed Vitakraft Sun Seed Inc Sheba Mars Inc 0.5 0.5 0.6 0.6 Wardley Hartz Mountain Corp 0.2 0.2 0.2 0.2 8 in 1 Spectrum Brands Inc 0.2 0.1 0.1 0.2 Whisker Lickin's Nestl SA 0.2 0.1 0.1 0 Private label Private Label 8.2 8.2 7.7 7.6 Others Others 18.7 18.7 18.6 18.3
Source: Euromonitor International

2009 10.8 8.4 7.5 6.7 4.7 4 3.9 3.4 2.4 2.3 2 1.8 1.7 1.5 1.3 1.3 1.2 1 1 0.9 0.9 0.8 0.6 0.5 0.5 0.5 0.5 0.5 0.4 0.3 0.2 0.2 0.2 0.2 0.2 0.2 0 7.7 17

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REGULATIONS AND LABELLING

Pet food sold in Canada is currently subject to the following Canadian and international regulations: The Government of Canada's enhanced animal health safeguards, implemented in July 2007, make it illegal for specified risk materials to be fed to any animal, including dogs and cats. In July of 2009, Canada introduced new regulations regarding the importation of commercial pet food from the United States. Under the new regulations, importers must apply for and present a valid import permit from the Canadian Food Inspection Agency in order to transport commercial pet food across the border. Crucial for pet food players in Canada, the importer bears the responsibility of applying for and obtaining the permit on time. The labelling and advertising of pet food is regulated by the Consumer Packaging and Labelling Act and the Competition Act, administered by Industry Canada. The Advertising and Labelling of Pet Food is a voluntary guide developed to ensure consistency and accuracy on pet food labels. These guidelines also help ensure that Canadian consumers clearly understand the contents of each package of pet food. They were developed by a working group including Canadian pet food manufacturers and importers, representatives from the Competition Bureau and the Government of Canada, as well as consumers. The Consumer Packaging and Labelling Act mandates the following items be included on pet food labels: Common or generic name: e.g. "Dog Food" or "Cat Food." Net weight: amount of product within the package, measured in metric units. The manufacturer's or importer's contact information. The Advertising and Labelling of Pet Food, an accepted standard in the pet food industry, recommends that pet food labels contain at least the following information in addition to the Consumer Packaging and Labelling Act items: Ingredients must be listed and identified by their common name. When an ingredient or combination of ingredients makes up 90% or more of the total weight of all ingredients, these ingredients may also form a part of the product name. For example, if the product contains 90% or more beef, it may be called "My Brand Beef Dog Food". Feeding instructions. Guaranteed analysis: information on the minimum and maximum nutritional quantities. For example, the analysis will include the maximum or minimum percentage of protein, fat, fibre and moisture. Nutritional adequacy or intended life stage for which the food is suitable.

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PRODUCT DEVELOPMENTS
PETsMART will be selling holistic pet food under the Innova brand commencing May 2011. The range will be produced by the Natura Pet Products line, and was previously only available at independent pet specialty retailers. The chain has reported that a significant portion of their sales come from premium pet food for dogs and cats. Purina states that their most exciting launch in the past year was their Beyond product, which includes packaging in bags made from 90% renewable material that are printed with soy-based inks. Also, the brand is produced at a Nestl Purina plant in Denver, Colorado, U.S. thats partially run on solar power. Canadas WellPet company released Original Adult Natural Dog Food under the Eagle Pack brand. Eagle Pack Original Adult Natural Dog Food has been reformulated and now contains glucosamine. It has also been repackaged and is available in a 6-lb pack featuring a new look. In Canada, Holistic Blend released Chicken Rice and Vegetable Dog Food under its name brand. Holistic Blend Chicken Rice and Vegetable Dog Food is suitable for all life stages, and is made with free range chicken, chelated minerals, antioxidants, herbs, whole grains, and fruit. Private label pet food is making progress in the industry by replicating the strategies of the larger companies branded products. Their focus is on food formulations and upgraded packaging, enabling them to better compete against mid-priced, rather than economy, pet food. The aging pet population, which constitutes the majority of pets owned in Canada, is fuelling the growth of pet food products developed to address their special dietary requirements. Products developed to help alleviate hip and joint, and digestive problems are hitting the shelves in growing numbers. As an example, Pedigrees line of treats, Good Bites, offers multi-vitamin and hip-and-joint treats. The Hills Science Diet brand now offers treats with labels such as immunity support, mobility and light. There were 138 new pet food products launched in Canada in 2010. Functional, natural and plus food categories saw the most activity, claiming the majority of new product launches in 2010. The favoured package used by manufacturers for the majority of both dog and cat food, was bags in a wide range of sizes.

Canada - New Product Releases - Pet Food Sector - 2010

Food Type Dog Snacks & Treats Dog Food Dry Dog Food Wet Cat Food Dry Cat Food Wet Cat Snacks & Treats Total
Source: Mintel

Functional Natural Plus 24 39 1 15 2 0 81 28 29 11 7 0 1 76 15 33 8 12 4 1 73

Ethical & Suitable Positioning Minus Convenience Functional Environmental for 15 12 10 0 5 1 43 19 9 2 3 0 0 33 6 9 6 5 2 2 30 17 5 0 3 0 1 26 21 1 0 0 1 1 24 7 5 0 3 0 0 15

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Canada - Dog food New Product Launches - by Claim and Category2010 Sub-Category Dry Food Claim Category Convenience Package Type Stand-up pouch Pack Size 4000 g 2700 g - 3630 g 1600g - 4000 g 2270 g - 2721 g 2700 g - 4000 g 2720 g - 3630 g 1600 g - 3630 g 2270 g - 4000 g 2000 g - 3000 g 2270 g -4000 g 283 g - 624 g 374 g 374 g - 624 g 369 g Number 1 11 27 2 4 5 27 7 18 4 10 1 11 8

Ethical & Environmental Bag Functional Functional Functional Minus Natural Natural Plus Plus Wet Food Functional Natural Plus
Source: Mintel

Bag Flexible Stand-up pouch Bag/stand-up pouch Bag Flexible/Stand-up pouch Bag Flexible/Stand-up pouch Can Can Can

Ethical & Environmental Can/Tub

Canada - Cat food New Product Launches Breakdown by Claim and Category 2010 Sub-Category Dry food Claim Category Functional Natural Plus Convenient Ethical & Environmental Functional Plus Package Type Bag Bag Bag Tray Can Can/tray Can/tub Pack Size 2000 g - 1500 g 1500 g - 2490 g 1500 g - 2490 g 100 g 85 g 85 g - 100 g 85 g - 156 g Number 12 7 12 1 1 2 4

Wet Food

Source: Mintel

Premium Dog Food

Premium Dry Cat Food

Adult Natural Dog Food

Source: Mintel PAGE 10

DOG FOOD

As of 2010, 32.3% of Canadian households owned a dog, a slight dip in numbers from 35.1% in 2009. The dog population has remained relatively stable, reaching just over five million in 2010. Unit prices will continue to rise, reflected in the gap between value and volume sales. Dog treats and mixers, with an estimated CAGR of 14.8% from 2005 to 2010, had the greatest volume growth in Canadas dog food/treat industry. Following closely behind was dry dog food with a CAGR of 11.3% over the same time frame. To a lesser extent, wet dog food also experienced growth, with a CAGR estimate of 2% from 2005-2010.

When taking a look at value growth percentages between 2005 to 2010, we see a CAGR of 26.3% for dog treats/ mixers, followed by 21.4% for dry dog food, and a CAGR of 12.8% for wet dog food. Canadian dog owners who purchased premium dog food, overwhelmingly chose dry over wet food in 2010, with sales reaching CAD $160 million.

Canada - Dog Food by Price Band 2009 Category Wet dog food Premium Standard Economy Premium Standard Economy Price range per kg $CAD Above $5.00 $2.50-$5.00 Below $2.50 Above $3.50 $1.75-$3.50 Below $1.75

Dry dog food

Source: Euromonitor International

Canada - Sales of Dog Food by Type: Volume tonnes2005-2010 tonnes Dog Treats and Mixers Dry Dog Food Wet Dog Food Dog Food 2005 10,490.30 230,360.60 32,931.80 273,782.80 2006 10,695.40 238,128.90 33,215.90 282,040.20 2007 11,072.60 242,087.50 32,909.90 286,069.90 2008 11,452.40 246,057.50 32,902.10 290,412.10 2009 11,738.80 250,843.20 33,238.50 295,820.60 2010 12,044.20 256,340.30 33,574.50 301,959.00

Source: Euromonitor International estimates

Canada - Sales of Dog Food by Type: Value 2005-2010 CAD$ millions CAD$ millions Dog Treats and Mixers Dry Dog Food Wet Dog Food Dog Food 2005 167.20 495.50 106.80 769.40 2006 173.70 516.80 109.30 799.80 2007 184.10 538.60 111.60 834.30 2008 194.40 559.30 114.70 868.40 2009 202.20 579.70 117.50 899.40 2010 211.10 601.50 120.40 933.00

Source: Euromonitor International estimates

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Canada - Sales of Dog Food by Type: % Volume Growth 2005-2010 % volume growth Dog Treats and Mixers Dry Dog Food Wet Dog Food Dog Food
Source: Euromonitor International estimates

2009/10 2.6 2.2 1 2.1

2005-10 CAGR 2.8 2.2 0.4 2

2005/10 TOTAL 14.8 11.3 2 10.3

Canada - Sales of Dog Food by Type: % Value Growth 2005-2010 % current value growth Dog Treats and Mixers Dry Dog Food Wet Dog Food Dog Food
Source: Euromonitor International estimates

2009/10 4.4 3.8 2.5 3.7

2005-10 CAGR 4.8 4 2.4 3.9

2005/10 TOTAL 26.3 21.4 12.8 21.3

Canada - Sales of Premium Dog Food: Value 2005-2010 - CAD $ million Item Premium Dry Dog Food Premium Wet Dog Food Premium Dog Food 2005 118.9 24.8 143.7 2006 126.6 26.5 153.1 2007 134.8 28 162.8 2008 143 29.8 172.8 2009 151.5 31.3 182.7 2010 160.3 33 193.3

Source: Euromonitor International estimates

Dog Food Competitors

Multinational players Nestl Purina Petcare Co., Mars Canada Inc., Del Monte Foods Co. and Proctor and Gamble Inc. together accounted for 75% of all dog food sales in Canada in 2009. Within the premium dry dog food sub-category, niche super-premium brands like Champion Pet Foods Orijen, are thriving. In the mid-priced dry dog food category, Nestle Purina Petcare Co. is the leader. Mars Canada Inc. led in the wet dog food category in 2009. While dry dog food garners a large share of dog food sales, there is an interesting situation developing in the premium wet dog food category. For years, Caesar wet dog food was relatively unchallenged, however, Loblaws recently entered the market with a private label line similar to Caesar. Both products are sold in convenient single serving containers, aimed at small dogs. Also, Nestl Purina has developed a human-style premium dog food under its Purina Beneful brand (WagWorld Adventure), that is not limited to small dogs. The popularity of these prepared meals has the potential to revitalize wet dog food.

Source: Mintel

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Canada - Dog Food Brand Shares 2006-2009 % Sales Brand Company Pedigree Mars Canada Inc Dog Chow Nestl Purina PetCare Co Iams Procter & Gamble Inc Purina ONE Nestl Purina PetCare Co Beneful Nestl Purina PetCare Co Alpo Nestl Purina PetCare Co Hill's Science Diet Hill's Pet Nutrition Canada Inc Kibbles 'n' Bits Del Monte Foods Co Pro Plan Nestl Purina PetCare Co Milk-Bone Del Monte Foods Co Pup-Peroni Del Monte Foods Co Meaty Bone Del Monte Foods Co President's Choice Loblaws Co Ltd Snausages Del Monte Foods Co Eukanuba Procter & Gamble Inc Nutro Nutro Products Inc Jerky Treats Del Monte Foods Co Compliments Sobeys Inc Ol' Roy Wal-Mart Canada Inc Other Private Label Other Private Label Others Others
Source: Euromonitor International estimates

2006 8.3 6.9 4.2 3.6 4.1 3.6 4.2 2.4 2.4 1.9 2.5 2.4 1.5 1.8 1.5 1.3 1.4 1.3 0.7 22.4

2007 19.6 8.3 6.4 4.6 4.1 4.1 3.5 4.1 2.8 2.3 2 2.3 2.2 1.6 1.6 1.4 1.3 1.3 1.2 0.8 21.8

2008 19.7 8.4 6.1 5 4.3 4.1 3.6 3.7 2.9 2.3 2 2.3 2.2 1.7 1.6 1.4 1.3 1.3 1.2 0.7 21.5

2009 19 8.3 6.2 4.9 4.3 4.1 3.7 3.4 2.9 2.6 2.4 2.3 2.2 1.8 1.6 1.4 1.3 1.3 1.3 0.6 21.8

Canada - Dog Treats Brand Shares 2006-2009 % Sales Brand Company Pedigree Mars Canada Inc Milk-Bone Del Monte Foods Co Pup-Peroni Del Monte Foods Co Meaty Bone Del Monte Foods Co Snausages Del Monte Foods Co Jerky Treats Del Monte Foods Co President's Choice Loblaws Co Ltd Beggin' Strips Nestl Purina PetCare Co Ol' Roy Wal-Mart Canada Inc Compliments Sobeys Inc T-Bonz Nestl Purina PetCare Co Grreat Choice PetSmart Canada Inc Alpo Nestl Purina PetCare Co Iams Procter & Gamble Inc Pedigree Effem Foods Inc Other Private Label Other Private Label Others Others
Source: Euromonitor International estimates

2006 10.9 8.6 11.4 7 6.2 2.8 2.2 1.7 1.8 1.6 0.6 0.8 0.8 19.7 1 22.9

2007 20.3 10.3 9 10.7 7.4 6.1 2.9 2.4 1.8 1.8 1.6 0.7 0.7 0.7 1 22.6

2008 20.1 10.3 9.1 10.4 7.6 6 3.1 2.5 1.8 1.8 1.6 0.7 0.8 0.7 1 22.6

2009 20.2 11.6 10.5 10.4 7.8 5.9 3.3 2.5 2 1.8 1.5 0.9 0.7 0.6 0.9 19.2

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Canada - Forecast Sales of Dog Food by Type: Volume 2011-2015 tonnes 2011 2012 2013 Dog Treats and Mixers 12,405.40 12,789.70 13,147.60 Dry Dog Food 262,012.50 267,471.20 272,712.60 Wet Dog Food 33,867.70 34,133.70 34,363.70 Dog Food 308,285.50 314,394.60 320,223.90
Source: Euromonitor International estimates

2014 13,476.10 277,679.00 34,549.90 325,705.00

2015 13,759.10 282,068.90 34,680.50 330,508.40

Canada - Forecast Sales of Dog Food by Type: Value 2011-2015 CAD $ million 2011 2012 2013 Dog Treats and Mixers 218.9 227.4 234.5 Dry Dog Food 621 641.8 664.2 Wet Dog Food 122.9 125.6 128.8 Dog Food 962.7 994.9 1,027.40
Source: Euromonitor International estimates

2014 241.5 686.2 131.9 1,059.50

2015 247.5 706.9 134.7 1,089.10

Canada - Forecast Sales of Dog Food by Type: % Volume Growth 2010-2015 % volume growth Dog Treats and Mixers Dry Dog Food Wet Dog Food Dog Food 2010-15 CAGR 2.7 1.9 0.7 1.8 2010/15 TOTAL 14.2 10 3.3 9.5

Source: Euromonitor International estimates

Canada - Forecast Sales of Dog Food by Type: % Value Growth 2010-2015 2010/15 % constant value growth TOTAL Dog Treats and Mixers 17.3 Dry Dog Food 17.5 Wet Dog Food 11.8 Dog Food 16.7
Source: Euromonitor International estimates

Source: Mintel

PAGE 14

CAT FOOD
Canadian cat food sales increased by 4.5% in value during 2010, rising to CAD $632 million, while volume grew by 2%, reaching 152,864,000 tonnes. Dry cat food sales showed the most growth in 2009 at 5%. Cat food is projected to increase at a CAGR of 3.1% over the forecast period to reach CAD $ 737 million in 2015. Sales of both wet and dry premium cat food are relatively the same when comparing price per kilogram. Cat food sales have been relatively unaffected by external pressure from the economy or consumers. The general nature of cats dietary needs consists mainly of high protein content. Varieties of cat food, including private label, offer wet cat food in many flavours. Segmentation by breed size does not exist in cat food, however there are variants for kittens, adults and seniors, as well as formulations that target specific cat ailments, such as hair-ball control and weight management. The cat food industry is fairly mature with limited opportunities for expansion, and is expected to experience minimal growth in the coming years. New import regulations for bovine products from the U.S. since mid-2009 have not had a significant impact on the cat food industry, other than smaller manufacturers opting to not source bovine-based pet food from the United States.

Canada- Sales of Cat Food by Type: Value 2005-2010 CAD $ million Cat Treats and Mixers Dry Cat Food Wet Cat Food Total Cat Food 2005 45.5 278.7 197.9 522 2006 48.7 296.7 197.1 542.6 2007 52 314.5 199.9 566.3 2008 55.2 332.3 204.2 591.7 2009 58 346.8 207.5 612.3 2010 59.8 361.8 211 632.5

Source: Euromonitor International estimates

Canada - Cat Food by Price Band 2009CAD $ Sector Price range per kg Wet Cat Food Premium Above $5.00 Standard $3.55-$5.00 Economy Below $3.55 Dry Cat Food Premium Above $5.00 Standard $2.75-$5.50 Economy Below $2.75
Source: Euromonitor International

PAGE 15

Canada - Sales of Cat Food by Type: Volume 2005 to 2010

2010
2,297.20

49,477.70 101,089.10

152,864.00

2009
2,252.10

49,316 98,258.90

149,827.00

2008
2,165.50

49,419.90

146,997.70 95,412.30 144,218.10 92,560.10 142,088.70 89,768.80 138,442.80 85,349

Cat Food Wet Cat Food Dry Cat Food Cat Treats and Mixers

2007
2,079.90

49,578.10

2006
1,995.60

50,324.30

2005
1,901.70

51,192.10

0.00

50,000.00

100,000.00 '000 tonnes

150,000.00

200,000.00

Source: Euromonitor International

Canada - Sales of Cat Food by Type: % Volume Growth 2005-2010 % volume growth 2009/10 2005-10 CAGR 2005/10 TOTAL Cat Treats and Mixers 2 3.9 20.8 Dry Cat Food 2.9 3.4 18.4 Wet Cat Food 0.3 -0.7 -3.3 Cat Food 2 2 10.4
Source: Euromonitor International estimates

Canada - Sales of Cat Food by Type: % Value Growth 2005-2010 % current value growth 2009/10 2005-10 CAGR 2005/10 TOTAL Cat Treats and Mixers 3 5.6 31.4 Dry Cat Food 4.3 5.4 29.8 Wet Cat Food 1.7 1.3 6.6 Cat Food 3.3 3.9 21.2
Source: Euromonitor International estimates

PAGE 16

Cat Food Competitors

Nestl Purina Petcare Co. and Mars Canada Inc. together accounted for 58% of all cat food sales during 2009. In 2009, Nestl Purina Petcare Co. remained the feline nutrition company with the highest sales in Canada, for both wet and dry food, with a market share of 36%. Keeping their products in the mid-price range is a key factor for their success. Mars Canada Inc. is known for its Whiskas brand of cat food, which is available in both dry and wet forms. Other cat food brands in their line are targeted to address the various health and wellness issues important to both cats and their owners.

Canada - Cat Food Brand Shares 2006-2009 % retail value rsp Whiskas Friskies Cat Chow Iams Hill's Science Diet President's Choice Fancy Feast Nutro Compliments Meow Mix Purina ONE Special Kitty 9 Lives Pounce No Name Eukanuba President's Choice Gourmet Sheba Special Kitty Select SophistaCat Techni-Cal Whisker Lickin's Other Private Label Others Company Mars Canada Inc Nestl Purina PetCare Co Nestl Purina PetCare Co Procter & Gamble Inc Hill's Pet Nutrition Canada Inc Loblaws Co Ltd Nestl Purina PetCare Co Nutro Products Inc Sobeys Inc Del Monte Foods Co Nestl Purina PetCare Co Wal-Mart Canada Inc Del Monte Foods Co Del Monte Foods Co Loblaws Co. Ltd Procter & Gamble Inc Loblaws Co Ltd Mars Canada Inc Wal-Mart Canada Inc PetSmart Canada Inc Royal Canin Canada Nestl Purina PetCare Co Other Private Label Others 2006 17.6 9.6 8.7 4.4 3.3 2.4 2.4 2.6 2.5 1.4 1.4 1.5 1.2 1 0.9 0.7 0.3 0.2 0.2 0.3 0.6 14.4 2007 20.8 18.3 9.9 7.8 4.1 3.1 2.5 2.3 2.4 2.4 1.5 1.3 1.4 1.2 0.9 0.8 0.7 1.4 0.3 0.2 0.2 0.1 0.6 15.3 2008 21.1 19.5 10.1 7.4 4.2 3 2.6 2.1 2.4 2.3 1.6 1.3 1.2 1.1 0.8 0.8 0.7 1.5 0.3 0.2 0.2 0.1 0.5 15 2009 21.6 19.3 10.1 8.1 4.9 3 2.7 2.5 2.4 2.3 1.7 1.4 1.2 1.2 0.8 0.8 0.7 0.4 0.4 0.2 0.1 0.1 0.4 13.7

Source: Euromonitor International estimates

PAGE 17

Canada - Cat Treat Brand Shares 2006-2009 % retail value rsp Company 2006 13.7 4.4 1.1 1 3.8 2.7 2007 72 12.8 2.5 1.1 1 1.6 1.5 2008 72.2 12 1.6 1.1 1 0.9 0.6 2009 72.3 12.3 1.6 1.3 1 0.9 0.6 Temptations Mars Canada Inc Pounce Del Monte Foods Co Meow Mix Treat Del Monte Foods Co President's Choice Loblaws Cos Ltd Special Kitty Wal-Mart Canada Inc Whisker Lickin's Nestl Purina PetCare Co 9 Lives Cat Nippers Del Monte Foods Co
Source: Euromonitor International estimates

Canada - Forecast Sales of Cat Food by Type: % Volume Growth 2010-2015 % volume growth Cat Treats and Mixers Dry Cat Food Wet Cat Food Cat Food 2014/15 3.1 2.9 0.3 2.2 2010-15 CAGR 2.2 3.1 0.5 2.3 2010/15 TOTAL 11.3 16.6 2.6 12

Source: Euromonitor International estimates

Canada - Forecast Sales of Cat Food by Type: Volume 2010-2015 '000 tonnes Cat Treats and Mixers Dry Cat Food Wet Cat Food Cat Food 2010 2011 2012 2013 2014 2015 2,297.20 2,331.60 2,371.20 2,416.30 2,479.10 2,556 101,089.10 104,239.40 107,631.20 110,971.10 114,509.10 117,878.80 49,477.70 49,769.80 50,090.80 50,369.10 50,610.10 50,779.90 152,863.90 156,340.80 160,093.20 163,756.50 167,598.30 171,214.70

Source: Euromonitor International estimates

Canada - Forecast Sales of Cat Food by Type: % Value Growth 2010-2015 % constant value growth Cat Treats and Mixers Dry Cat Food Wet Cat Food Cat Food 2010-15 CAGR 2.7 4 1.6 3.1 2010/15 TOTAL 14.2 21.8 8.4 16.6

Source: Euromonitor International estimates

Canada - Forecast Sales of Cat Food by Type: Value 2010-2015 CAD$ million 2010 2011 2012 2013 Cat Treats and Mixers 59.8 60.6 61.6 62.9 Dry Cat Food 361.8 377.1 392.8 408.8 Wet Cat Food 211 214 217.7 221.7 Cat Food 632.50 651.70 672.10 693.40
Source: Euromonitor International estimates

2014 65.4 424.7 225.3 715.50

2015 68.3 440.6 228.60 737.50

PAGE 18

OTHER PET FOOD

Non-conventional pet ownership is rare in Canada so growth is more subtle, with the other pet sector displaying little change in ownership trends over the years. Fish were overwhelmingly the most popular other pet choice for Canadians in 2010; further sector breakdown shows that birds continue to be favoured over small mammals, and reptiles are owned by a small portion of the population. The Canadian other pet food sector remained small, accounting for 4% of total pet food value in 2009. When taking a look at other pet food volume sales, bird feed reached 2,766 tonnes in 2010, up from 2,727 tonnes in 2009, making it the category with the highest consumption. However, due to the widely varied density composition of the pet foods found in the other pet food category, the discrepancy in tonnage amongst these categories may be less relevant than in the cat or dog food sectors. Bird, small mammals and reptiles, and fish food come in a wide selection of type and packaging that caters to different breeds and different tastes.

Canada - Other Pet Population 2005-2010 - '000s of animals Bird Population Fish Population Small Mammal Population Reptile Population
Source: Euromonitor International estimates

2005 2,538.00 7,842.00 1,186.00 223

2006 2,618.00 7,913.00 1,203.00 237

2007 2,653.10 8,113.40 1,208.20 251

2008 2,688.40 8,316.70 1,213.30 265

2009 2,688.00 8,316.00 1,214.00 265.1

2010 2,687.00 8,315.00 1,214.50 266

Canada - Sales of Other Pet Food by Type: Volume 2005-2010 2005 2006 2007 tonnes Bird Food 2,495.20 2,623.30 2,658.40 Fish Food 195.90 199.10 204.10 Small Mammal/ 1,594.70 1,609.10 1,631.10 Reptile Food Other Pet Food 4,285.80 4,431.50 4,493.70
Source: Euromonitor International estimates

2008 2,695.20 209.00 1,651.80 4,556.10

2009 2,727.80 214.60 1,674.30 4,616.70

2010 2,766.00 219.60 1,708.20 4,693.80

Canada - Sales of Other Pet Food by Type: % Volume Growth 2005-2010 2009/10 2005-10 CAGR 2005/10 TOTAL Bird Food 1.4 2.1 10.9 Fish Food 2.3 2.3 12.1 Small Mammal/ Reptile Food Other Pet Food 2 1.7 1.4 1.8 7.1 9.5

Source: Euromonitor International estimates

PAGE 19

CanadaSales of Other Pet Food by Type: CAD $ - Value 2005-2010 2005 2006 2007 Bird Food 25.1 26.5 27.4 Fish Food 23.5 24.6 25.8 Small Mammal/Reptile Food 7 7.4 7.6 Other Pet Food 55.6 58.5 60.9
Source: Euromonitor International estimates

2008 28.3 27 7.9 63.2

2009 29.3 28.2 8.2 65.7

2010 30.3 29.4 8.5 68.2

Canada - Sales of Other Pet Food by Type: % Value Growth 2005-2010 2009/10 2005-10 CAGR 2005/10 TOTAL Bird Food 3.4 3.9 21 Fish Food 4.2 4.5 24.8 Small Mammal/ 3.7 3.8 20.4 Reptile Food Other Pet Food 3.8 4.1 22.5
Source: Euromonitor International estimates

Other Pet Food Competitors

Rolf C. Hagen Inc., leads other pet food in Canada, accounting for 28% of value sales in 2009, a slight increase from 2008. This company is strong in bird food and small mammal/reptile food. Spectrum Brands Inc. takes second position with 26% of retail sales in 2009. The majority of its sales are from fish food, where its brand Tetra accounts for 50% of value sales. Rounding out the top three competitors in the other pet food sector is Hartz Canada, with a 16% value share in 2009. Private label constituted 14% of other pet food value in 2009. Private label in other pet food is different from the private label lines of major chained grocery retailers found in dog and cat food. Private label in the context of other pet food refers to products marketed mainly by pet-specialist retailers.

PAGE 20

Canada - Bird Food Brand Shares 2006-2009 % retail value rsp Company Living World Hartz KayTee Sun Seed 8 in 1 Private label Others Rolf C Hagen Inc Hartz Canada Inc KayTee Products Inc Sun Seed Co Inc Spectrum Brands Inc Private Label Others 2006 22.1 22 15 8.5 7.1 20.9 4.4 2007 23.7 21.5 15.9 9 7.2 21.5 1.2 2008 23.9 21.9 15.3 8.4 7.9 21.6 1 2009 24.2 22 15.4 8.3 7.6 21.6 0.9

Source: Euromonitor International estimates

Canada - Fish Food Brand Shares 2006-2009 % retail value rsp Company Tetra Nutrafin Wardley Tetra Private label Others Spectrum Brands Inc Rolf C Hagen Inc Hartz Canada Inc Tetra Werke GmbH Private Label Others 2006 47.1 30 9.7 7.4 5.8 2007 49.5 28.5 9.4 7 5.6 2008 49.9 28.3 9.4 6.9 5.6 2009 50 30 9.3 6.6 4.1

Source: Euromonitor International estimates

Canada - Small Mammal/Reptile Food Brand Shares 2006-2009 % retail value rsp Company Living World Hartz KayTee Exo-Terra Habitrail Sun Seed Tetra 8 in 1 Private label Others Rolf C Hagen Inc Hartz Canada Inc KayTee Products Inc Rolf C Hagen Inc Rolf C Hagen Inc Sun Seed Co Inc Spectrum Brands Inc Spectrum Brands Inc Private Label Others 2006 18.5 16 13.3 7.8 6.9 6.3 5.5 2.8 14.8 8.1 2007 19.9 16.5 13.5 8.5 6.9 6.8 5.9 2.8 14.8 4.5 2008 20 16.6 12.9 8.6 6.9 6.8 6.5 3.1 14.6 4.1 2009 20.1 16.8 12.9 8.4 6.8 6.8 6.5 3.2 14.5 3.9

Source: Euromonitor International estimates

PAGE 21

Canada - Forecast Sales of Other Pet Food by Type: Volume 2011-2015 tonnes Bird Food Fish Food Small Mammal/Reptile Food Other Pet Food 2011 2,799.20 224.50 1,745.80 4,769.50 2012 2,830.00 228.50 1,785.20 4,843.70 2013 2,858.30 232.00 1,829.80 4,920.10 2014 2,884.30 234.50 1,876.60 4,995.40 2015 2,904.50 236.90 1,914.60 5,056.00

Source: Euromonitor International estimates

Canada - Forecast Sales of Other Pet Food by Type: Value 2011-2015 CAD million 2011 2012 2013 2014 Bird Food 60 59.7 59.3 58.4 Fish Food 71.9 72.3 73.3 74.1 Small Mammal/Reptile 126.1 128.1 129.9 131.1 Food Other Pet Food 70.1 72.1 74 75.8
Source: Euromonitor International estimates

2015 57.3 74.6 132.4 77.4

Canada - Forecast Sales of Other Pet Food by Type: % Volume Growth 2010-2015 % volume growth 2014/15 2010-15 CAGR 2010/15 TOTAL Bird Food 0.7 1 5 Fish Food 1 1.5 7.8 Small Mammal/Reptile Food 2 2.3 12.1 Other Pet Food 1.2 1.5 7.7
Source: Euromonitor International estimates

Canada - Forecast Sales of Other Pet Food by Type: % Value Growth 2010-2015 % constant value growth 2010-15 CAGR 2010/15 TOTAL Bird Food 2.3 12.1 Fish Food 2.5 13.1 Small Mammal/Reptile Food 3.7 20 Other Pet Food 2.6 13.5
Source: Euromonitor International estimates

PAGE 22

ANNEX A
This report analyses the market for pet food in Canada. For the purpose of the study, the market has been defined as follows: Dog food Cat food Other pet food Dog and cat food sales are broken down by product type (wet/dry) and price platform. Examples of key brands in each price platform in Canada are as follows: Super premium: Orijen, Evo Standard premium: Hills Science Diet, Eukanuba Mid-priced: Iams, Pedigree, Presidents Choice, Fancy Feast Economy: Compliments Value, No Name

ANNEX B
Resources/Contacts
Pet Food Association of Canada P.O. Box 35570, 2528 Bayview Avenue Toronto, Ontario M2L 2Y4 Tel: 416.447.9970 Fax: 416.443.9137 Web: http://www.pfac.com Canadian Food Inspection Agency (National Headquarters) 1400 Merivale Road Ottawa, Ontario K1A 0Y9 Tel: 1-800-442-2342 or 1-613-225-2342 Web: http://www.inspection.gc.ca/english/anima/petfaani/petfaanie.shtml

Competition Bureau of Canada

Guide for Labeling and Advertising of Pet Foods 50 Victoria Street Gatineau, Quebec K1A 0C9 Tel: 1-800-348-5358 Fax: 1-819-997-0324 Web: http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/01229.html Pet Food stores in Canada - a listing of retailers by city can be found at: http://www.shopincanada.com/Pets/Pet-Food/

PAGE 23

The Government of Canada has prepared this report based on primary and secondary sources of information. Although every effort has been made to ensure that the information is accurate, Agriculture and Agri-Food Canada assumes no liability for any actions taken based on the information contained herein.

Consumer Trends: Pet Food in Canada Her Majesty the Queen in Right of Canada, 2011 ISSN 1920-6615 Market Indicator Report AAFC No. 11496E Photo Credits All Photographs reproduced in this publication are used by permission of the rights holders. All images, unless otherwise noted, are copyright Her Majesty the Queen in Right of Canada. For additional copies of this publication or to request an alternate format, please contact: Agriculture and Agri-Food Canada 1341 Baseline Road, Tower 5, 4th floor Ottawa, ON Canada K1A 0C5 E-mail: infoservice@agr.gc.ca Aussi disponible en franais sous le titre : Tendances de la consommation : Le march canadien des aliments pour animaux familiers